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Downsides To Investing In Cryptocurrency Part 2

March 16, 2022

In my last article, I talked about ‘what is cryptocurrency?’, and gave you 2 disadvantages of investing in crypto. Now, let’s continue with the rest. 

Cryptocurrencies have yet to demonstrate their worth as a long-term investment.

While cryptocurrencies have grown in popularity in recent years, it’s important to realise that they’ve only been around for a little over a decade. The notion gained traction after a white paper on Bitcoin was published in 2008. Stock markets, on the other hand, have hundreds of years of history. For example, the London Stock Exchange was established in 1801. For millennia, gold has been a proven keeper of value. But what about cryptocurrencies? Nobody knows what will happen to cryptocurrencies in the future. Take for example when the market crashed in January 2018, causing a massive loss of 65%. Or what about just recently in February, when China made all transactions using cryptocurrency illegal, causing the prices of these digital currencies to drop. As an investor, you must be daring to venture into these new and troubling waters. However, if you manage to learn the ropes, it could be the very thing that makes you rich. 

Cryptocurrency has significant scalability concerns.

You could be forgiven for thinking that digital currencies move at breakneck speed—and you’d be right, to some extent. However, they run into severe challenges at a certain point, making it difficult to implement them on a big scale. Cryptocurrency miners themselves acknowledge that this is a problem, with Ethereum’s creators claiming that the blockchain has reached “certain capacity restrictions” that hinder transaction processing. For transaction participants, this can be a frustrating process, to say nothing of the potential financial consequences.

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Newcomers to cryptocurrency are in danger of security breaches.

Cryptocurrencies may avoid the risks associated with employing central intermediaries, but that does not mean they are without security flaws. As a crypto owner, you risk losing your private key, which allows you to access your coins and, with it, your whole portfolio. Then there’s hacking, phishing, and all the other nefarious attempts to acquire control. This is something that seasoned investors are aware of, but newer investors are more likely to fall victim to such traps.

Despite all this, it’s not wrong if you still wish to brave the waters in this lucrative investment. Instead, it is advisable that you keep yourself updated with the latest information. Check out real-time cryptocurrency news as this can serve as your armour to help you guard against any bad investments. So where should you start?

Which cryptocurrency is the best to invest in?

There isn’t a single cryptocurrency that is significantly superior to the rest. It all boils down to personal preference, but there are a few things to keep an eye out for. Consider your own risk tolerance: can you afford to lose a significant portion of your investment if the value of your chosen coin drops? Are you planning to use the currency only to earn profits, or are you going to use it to pay for items as well? Is it only about the money, or do you want to put your money into a currency that has a larger social or environmental impact? One simple method is to choose the market leader, Bitcoin. It’s the first cryptocurrency, and it’s also the one with the greatest knowledge base.